By Ed Frankl
The U.S. services industry unexpectedly contracted in April, ending a sequence of consecutive months of growth since December 2022, according to survey data released Friday.
The Institute for Supply Management's services-activity index ticked down to 49.4 in April from 51.4 in March, below expectations from economists who expected the index to edge up to 52.0, according to a poll compiled by The Wall Street Journal ahead of the release.
A reading below the no-change mark of 50 indicates contraction in the services sector, which has grown for 15 straight months, and 45 of the past 47, the ISM said.
"The decline in the composite index in April is a result of lower business activity, slower new orders growth, faster supplier deliveries and the continued contraction in employment," said Anthony Nieves, chair of the ISM Services Business Survey Committee.
Survey respondents said overall business was generally slowing, while inflation and geopolitical issues remain concerns, he added.
Of particular interest to the Federal Reserve, which has faced some higher-than-expected recent inflation readings, the ISM's prices index for services climbed 5.8 points higher to 59.2. Markets have pushed back expectations for interest-rate cuts in recent months.
Contributing to the decline in the overall index, the survey's component for business activity tumbled 6.5 points to 50.9, while new orders dipped 2.2 points to 52.2. Employment was weaker, too, falling further below the no-change mark to 45.9, while supplier-delivery times quickened, indicating lower demand.
"Inflation is raising our unit cost on products and services when compared to last year's expenditures," said one respondent to the survey from the public-administration sector.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
05-03-24 1037ET
